Gold Price Vulnerable to RSI Sell Signal

Gold Price Outlook: XAU/USD

The price of gold falls back from a fresh record high ($2686) to pull the Relative Strength Index (RSI) back from an extreme reading, but the precious metal may continue to reflect a bullish trend as it tracks the positive slope in the 50-Day SMA ($2499).

Gold Price Vulnerable to RSI Sell Signal

The rally in bullion seems to be stalling as it snaps the recent series of higher highs and lows, with the RSI starting to reflect a sell signal as it struggles to hold above 70.

In turn, the oscillator may show the bullish momentum abating going into the end of the third quarter, but the shift lower in global interest rates may keep the price of gold afloat as the precious metal still serves as an alternative to fiat currencies.

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With that said, the price of gold may face a larger pullback if it fails to defend the weekly low ($2614), but key macroeconomic developments may continue to sway the precious metal as major central banks move towards a neutral policy.

XAU/USD Price Chart – Daily

Chart Prepared by David Song, Strategist; XAU/USD on TradingView

The price of gold may fall towards $2630 (78.6% Fibonacci extension) as it snaps the bullish price series, with a break/close below $2590 (100% Fibonacci extension) raising the scope for a move towards the $2550 (61.8% Fibonacci extension) to $2570 (161.8% Fibonacci extension) region.
Next area of interest comes in around $2500 (50% Fibonacci extension) but the price of gold may continue to track the positive slope in the 50-Day SMA ($2499) as long as its holds above the moving average.
In turn, the weakness in bullion may end up short-lived if it defends the weekly low ($2614) but need a breach above the monthly high ($2686) to bring $2730 (100% Fibonacci extension) back on the radar.

--- Written by David Song, Senior Strategist

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